The wild world of NFTs
Keri A Kitson
Independent Legal Practitioner, Port-of-Spain & Cunupia, Trinidad
Introduction: NFTs and the metaverse
The hype surrounding the metaverse reached new heights when Meta (formerly known as Facebook) announced its foray into the concept in 2021. As the world blazed ahead with this idea, digital assets – which were already trending – became much sought after. One such asset was non-fungible tokens (NFTs), which have been defined as ‘cryptographically unique tokens that are linked to digital (and sometimes physical) content, providing proof of ownership’.
NFTs can take the form of artwork, GIFs, video clips, photographs and tweets, among others, and they are usually connected to blockchain technologies such as Ethereum, Flow, Binance Smart Chain, Cardano, Solana, EOS.IO, WAX, Algorand, Tezos or TRON.
Image 1: Example of an NFT, ‘An Ode to Midnight’
In the third quarter of 2021 the trading volume for NFTs was recorded at $10.67bn. Trading volume in 2022 looks set to surpass this figure, as gaming companies (such as Ubisoft and Konami), sports leagues (like the National Basketball Association and National Football League), auction houses (like Christie’s and Sotheby’s) and other reputable companies, artists and creators position themselves to monetise and trade their respective NFTs in the potentially trillion-dollar market known as the metaverse.
Legal battles emerge
Yet, all that glitters is not gold, as legal battles have already begun to emerge in relation to NFTs. The court systems of various jurisdictions are grappling with the legal issues surrounding these digital assets, using legislation ranging from copyright, trademark and intellectual property law to securities contract, money laundering, Fintech and tax law. In some instances, courts appear to have widened the ambit of these laws in order to adequately deal with the legal issues surrounding NFTs. Among the more publicised cases are Roc-A-Fella Records Inc v Dash and Miramax LLC v Quentin Tarantino et al, which involved high-profile celebrities such as musician Jay-Z and film director Quentin Tarantino. In these cases, the courts explored the legal issues through the lens of copyright and trademark infringements.
The United States Securities and Exchange Commission (SEC) has taken the perspective that digital assets are akin to traditional assets, in the sense that they can be evaluated as ‘securities’. The SEC has rigidly adhered to the landmark Supreme Court case SEC v WJ Howey & Co as the underpinning for this perspective. In fact, the SEC has taken a keen interest in NFTs recently, and according to Bloomberg reporter Matt Robinson, has launched a probe into how NFTs are used.
Both the legislature and regulators are now on the cusp of possible change, as on 9 March 2022 US President Biden issued the Executive Order on Ensuring Responsible Development of Digital Assets. In a joint statement, National Economic Council Director Brian Deese and National Security Advisor Jake Sullivan indicated that this executive order would ‘establish the first-ever comprehensive federal digital assets strategy for the United States’. Time will indeed tell whether more stringent regulations will be instituted to guide this world of NFTs in the North American hemisphere.
AI4IA Conference: a soft law suggestion
Implementation of any regulations or guidelines to assist in navigating the world of NFTs would be in keeping with the proposals espoused during the ‘Artificial Intelligence for Information Accessibility (AI4IA) Conference 2021’ (the ‘AI4IA Conference’). This conference was hosted on 28 September 2021 by the United Nations Educational, Scientific and Cultural Organization (UNESCO) Information For All Programme (IFAP) Working Group.
During the conference, Gary Marchant, regents’ professor of law and director of the Center for Law, Science and Innovation at Arizona State University (ASU), delivered a presentation entitled ‘Soft Law Governance of AI and the Right to Know’, which highlighted the global pacing problems between the implementation of AI technologies and the development of legislation to treat it. Marchant advocates for adopting a soft law approach (that is, guidelines, codes of ethics, etc) as a more agile interim measure to ensure some practical governance of emerging and oftentimes unregulated AI and technologies. If the SEC steps into the NFTs foray in this manner, then Marchant’s proposal will merit further examination by governments across the globe in an attempt to alleviate the pacing problem that will be experienced by court systems globally until specific legislation is implemented to address this particular digital asset.
Until such time, the world of NFTs remains largely unregulated and akin to the Wild West, as more and more newcomers are attracted to the lure of striking proverbial gold in this new frontier.
 Melanie Kramer, Daniel Phillips and Stephen Graves, ‘Beginner’s Guide to NFTs: What are Non-Fungible Tokens?’ (Decrypt: 12 January 2022) https://decrypt.co/resources/non-fungible-tokens-nfts-explained-guide-learn-blockchain accessed 17 February 17 2022.
 KT_-Creatives, ‘An ode to Midnight’, The Memoriae Collection, Opensea Marketplace (used with permission).
 Andrew Hayward, ‘What is the Metaverse? The Immersive, NFT-Powered Future Internet’ (Decrypt: 17 February 2022) https://decrypt.co/resources/what-is-the-metaverse-immersive-nft-virtual-world accessed 8 March 2022.
 1:21-cv-05411-JPC (SDNY, 29 July 2021).
 2:2021 cv 08979 (US District Court for the Central District of California).
 Richard B Levin and Kevin Tran, ‘Fintech Laws and Regulations 2021: The Regulation of Non-Fungible Tokens in the United States’ (Global Legal Insight 2021)
 Matt Robinson, ‘SEC Scrutinizes NFT Market Over Illegal Crypto Token Offerings’ (Bloomberg Markets Crypto, 2 March 2022) www.bloomberg.com/news/articles/2022-03-02/sec-scrutinizes-nft-market-over-illegal-crypto-token-offerings accessed 8 March 2022.
 The White House Briefing Room, ‘Statement by NEC Director Brian Deese and National Security Advisor Jake Sullivan on New Digital Assets Executive Order’ (9 March 2022) www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/statement-by-nec-director-brian-deese-and-national-security-advisor-jake-sullivan-on-new-digital-assets-executive-order accessed 7 April 2022.